Income Tax Preparation
Which Tax Preparation Services Can I choose from?
Taxes are a burden that is mandatory for all earning and non earning individuals of the society. It is through which the monetary resources of an economy get regulated with ease and the government is able to earn federal tax return for the facilities that it provides to the people of its country. The IRS is basically the department that is responsible for collecting taxes, and is called the revenue service of the United States of America. The IRS comes under the Department of Treasury and the Commissioner of Internal Revenue controls this agency. This agency also makes sure that the tax law and Internal Revenue Code is enforced correctly and aims to diminish tax evasion and tax fraud by individuals and corporations.
The Internal Revenue Service
The Internal Revenue Services, abbreviated IRS has its headquarters in the Washington D.C., however the tax preparation is mostly done in the state of Maryland. This agency has a total of five offices where it operates from which are located in Texas, Ohio, California, Utah and Missouri. At these centers individuals and tax payers usually send in the amount that they owe by mail. Hence taxes are collected at these points. There are different types of centers present in West Virginia, Tennessee, Memphis, Detroit and Michigan where individual taxes and corporative or business taxes are processed. Some centers are responsible for the former while others are responsible for tax preparation of the latter.
What does the IRS do?
The IRS department has numerous administrative purposes regarding tax collection and a few will be discussed here. The main duty of this agency is to publish and provide tax forms to the tax payers. Individuals are support to get these tax forms and fill those in and send them by mail along with the taxes that they are obliged to pay. Also, the agency needs to fill in their own forms which monitor their internal operations and how well the IRS is doing in collecting taxes from its people. This is basically called internal processing of federal tax return.
Other functions of this agency involve finding those individuals who are involved in tax fraud. Once the agency finds cheaters, it usually administers two types of rulings; private letter rulings and revenue rulings. In the former, the cheater or the individual is allowed to explain his or her position, while in a revenue ruling the person is solely dependent on the agency to determine the person’s fate.
Lastly, this agency keeps a check regarding enforcement of all regulatory tax laws in a proper manner.
Online Tax Preparation
The agency responsible for tax collection has been discussed in detail. Now the process of preparing a sheet which determines the total taxes that you need to pay will be discussed. The process of determining how much tax you need to pay is called tax preparation. Tax can be prepared by the tax payer or some other individual who is an expert in this field for some sort of compensations. Such people are known as tax accountant or tax specialist. However, one can determine his or her own taxes themselves, even without the use of any particular software or online services that are present to provide help. Because of the complicated process, most individuals ask for outside help and get in touch with a tax specialist. Larger corporations always get it touch with such people to create their accounts and balance sheets because the process becomes very tedious and time consuming. These professionals need to be licensed by the government and must have certain amount of education for them to be eligible for this profession. In other cases where individuals decide to do their taxes themselves, there are softwares present that can help them to do this with ease.
What is tax software? Tax software is the best help you can get during the process of tax preparation. These software can be run of computers and can be used by individuals, corporations and tax accountant to file federal tax returns. Such software are immensely computer friendly and involve the user to fill out specific forms and calculate the tax itself, within a few minutes. Tax software can either by purchased from retail stores or can be purchased online or download, since it is also available as a SaaS (Service as a software). The main types of software which are the best for use are:
- Turbo Tax
- Tax ACT
- Tax Cut
These different software also provide users with different checklists so that they know whether they have completed the process thoroughly. These checklists also provide users with a double checking system through which they can surely file proper tax returns. A sample checklist for an individual who is filing tax returns includes the following things:
- Personal Information which includes name, date of birth, social security number, address and other details.
- Details regarding your income level which will include the following things:
- Income earned through your job
- Income earned through any investments made
- Any amount in alimony that is received
- If you have established your business at your home, then you will need to provide details regarding your home size, worth, ownership details etc.
- If you have any sort of business, you will need to create all accounts such as balance sheets, profit and loss statements, income statements and cash flow statements
- If any rental income is present, you will need to mention it too
- Apart from that any social security benefits should also be mentioned
- Any income earned from sale of property
- Any installments earned in the previous year
- Any other miscellaneous income
The next step is that you have to make adjustments to your income; these are known as federal tax deductions which may lower the amount of tax that you actually need to pay. These may include the following things:
- Any expenses incurred such as moving expenses or medical expenses
- Mortgages expenses
- Theft losses
- Child care expenses
- The expense you incur at the time of making an investment
- Alimony that is paid
- School or college expenses
- Any donations or contributions that have been made
- IRA contributions
The tax preparation should also include any prior taxes within this year that you have already paid which need to be eliminated from the actual amount.
- This may include real estate taxes that you have already paid
- State tax paid
- Property taxes that you might have paid
- Lastly you must also provide all your account numbers of local and foreign bank accounts that are in your name.